Trump demands auto jobs after signaling fuel economy relief

President Donald Trump is laying out an explicit quid pro quo for automakers: He’ll cut them a break on environmental standards and wants more hiring in return.

“You need to come back and give us big numbers in terms of jobs,” Trump told the chief executive officers of General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV on Wednesday. The Obama administration’s decision to preserve its fuel economy rules “would have destroyed, or further destroyed, the auto industry.”

Carmakers will now get another year to dispute the fuel mileage and emissions standards, which will be further scrutinized by the Environmental Protection Agency and National Highway Traffic Safety Administration. The companies cried foul over the EPA failing to collaborate with them and expediting a review of the requirements in the final days of Obama’s term.

Trump’s move to nullify the ruling of Obama’s EPA marks a victory for carmakers including GM, Toyota Motor Corp. and Volkswagen AG, which argued the standards are out of step with market realities. Low gasoline prices have spurred record demand for sport utility vehicles and pickups and dragged on demand for electric vehicles and fuel-sipping passenger cars.

GM seized on Trump’s announcement, made during a stop through Detroit’s suburbs, by saying it will add 220 new jobs at a transmission plant and retain another 680 workers in the state. Some positions will be filled or preserved by workers laid off at an SUV factory. The hires were planned before Trump took office, spokesman Pat Morrissey said.

GM’s ‘Peanuts’

“I told them ‘that’s peanuts,”’ Trump told a crowd of workers, referring to GM’s job announcement. “We’re going to have a lot more. They’re going to be building new plants, expanding their plants. My administration will work tirelessly to eliminate the industry-killing regulations, to lower the job-crushing taxes and to ensure a level playing field for all American companies and workers.”

Read more: Trump Picks Unfortunate Time to Push New U.S. Auto Factories

During the meeting with executives, Trump also reiterated a demand that Toyota make cars in the U.S. In an exchange with Jim Lentz, chief executive officer of Toyota Motor Corp.’s North American operations, footage on the White House’s official YouTube account showed Trump saying, “You’ve got to build those new plants here.”

Toyota will work with the Trump administration to “support policies that help grow our economy, reduce the impact on the environment and serve the best interest of consumers,” Kayo Doi, a Tokyo-based company spokeswoman, said in an emailed response to a request for comment following the meeting.

Jeeps, Rams

The lower fuel economy standards could lead Fiat Chrysler to invest more in Jeep SUV and Ram pickups produced in the U.S., CEO Sergio Marchionne told Bloomberg Television. The Obama administration’s attempt to short-circuit the review of fuel economy rules was “offensive,” he said.

Electric-vehicle maker Tesla Inc.’s stance mirrors the Obama administration’s — that the mileage and emissions standards are attainable.

“The recent success of auto manufacturers in responding to the growing demand for electric vehicles is proof that the nation’s current fuel economy standards are practical, achievable and having their intended effect,” a spokesman for the automaker led by Elon Musk said in an emailed statement.

Carmakers will make their case on the fuel economy standards to new EPA Administrator Scott Pruitt, who’s downplayed how much humans contribute to climate change. The agencies will restore the original timeline the Obama administration and auto industry agreed to, which was to determine by April 2018 whether standards for 2022 through 2025 are feasible.

“We still support the direction the program is taking us, although some adjustments might be necessary,” said Tom Stricker, vice president of product regulatory affairs for Toyota in North America. Factors including cheap gasoline prices have changed since the rules took effect, which is “the exact reason both sides agreed to a midterm review in the first place.”

Automakers agreed in 2011 to fuel economy standards set by the U.S. Transportation Department and greenhouse gas emissions rules decided by the EPA and California’s Air Resources Board. They call for companies to boost the fuel economy of their fleets to an average of more than 50 miles per gallon by 2025.

Falling Behind

Trump’s administration will reopen the review as cars and light trucks from the 2016 model year will be the first to fall short of fleet-wide average fuel economy targets in more than a decade, according to automaker projections released by NHTSA.

Why Trump Would Want to Slow Tough Fuel Standards: QuickTake Q&A

A White House official said Tuesday the administration isn’t currently contemplating a challenge to California’s authority to set its own vehicle emissions standards or electric-car sales mandates. The official also said reopening the review doesn’t guarantee that the standards will be weakened.

While the White House official told reporters the president’s move was narrowly focused on reviving the review, the former head of Trump’s EPA transition team said the administration is contemplating a full-blown attack on Obama’s fuel economy standards.

“This is not coming from the auto industry, it’s coming from consumers and the auto dealers association,” Myron Ebell, who left the Trump transition team in January, said of the onus for the potential rollback. “I don’t think the auto companies are united in what they want.”

California Digs In

The attack could come in the form of an official DOT determination that only NHTSA can regulate fuel economy, Ebell said. The Trump administration is actively considering such a finding, which would exclude the EPA and California from such rule-making, and could allow severe cuts in Obama’s original fuel economy targets, he said.

California’s Clean-Car Resistance to Donald Trump: QuickTake Q&A

California’s top air-quality regulator meanwhile said she’s ready to consider changes to the fuel economy standards — to a point. The current regulations could be improved from both an environmental and administrative standpoint, said Mary Nichols, chairman of the state’s Air Resources Board.

“We’re not going to refuse to participate in the newly-reopened review process,” Nichols said in a phone interview. “We’ll be there and we’ll be active.”

About BloombergNEF

BloombergNEF (BNEF) is a strategic research provider covering global commodity markets and the disruptive technologies driving the transition to a low-carbon economy. Our expert coverage assesses pathways for the power, transport, industry, buildings and agriculture sectors to adapt to the energy transition. We help commodity trading, corporate strategy, finance and policy professionals navigate change and generate opportunities.
Sign up for our free monthly newsletter →

Want to learn how we help our clients put it all together? Contact us